How Points On Your Record Affect Your Auto Insurance Rate

According to the Insurance Information Institute, the average American driver spends approximately $850 a year on car insurance premiums. There are many factors that affect the price you pay for auto insurance, including where you live, how much you drive your car, the type of car you drive, your age, your credit score and of course, your driving record.

The motor vehicle departments in each state throughout the United States have point systems which are used to track accidents and violations that impact your driving record. Insurance companies use these points and their own proprietary point system to help them formulate your insurance premium and whether or not your rates will rise after an accident or ticket.

Insurance and DMV Point Systems Might Not Be the Same

There are two different driving record points systems used to critique you as a driver; the one that the Department of Motor Vehicles (DMV) charges you for accidents and moving ticketed violations and the ones that insurance companies maintain independently.

The DMV points system is administered by the licensing department of the state you live in and each state has their own version of the point system. Exceeding your point allowance within a certain time period can result in the suspension of your driver’s license.

Merit Rating Plans on the other hand, also known as surcharge points, are filed and used by insurance companies instead of using the DMV’s system exclusively. Insurance companies use merit rating plans as an effective tool for calculating your insurance premium commensurate with the hazard they face as a company according to individual risk.

Merit Ratings Plans got their start from the 1930s when most states offered a safe driver reward plan. Later, in New York, a risk rating plan which penalized drivers with accident records was used. By the early 1950s, most states and insurance companies adopted some sort of risk rating point system instead of a safe driver reward plan much like the ones we know today.

How Do Driving Record Points Work?

The DMV point system is administered by the Department of Motor Vehicles in your specific state. In North Carolina, for instance, you get points added against your driving record if you are convicted of certain motor vehicle violations. When you get 12 points within a three-year period, you could have your license suspended. Once it is reinstated, accumulating eight points in the next three year period will result in another suspension in North Carolina.

Every state decides how many specific points to assign to various infractions and what time period a driver can be held accountable. Some infractions and their points values assessed in North Carolina include failing to stop for siren (3 points), having no liability insurance (3), running a stop sign (3), speeding more over 55 mph (3), failure to yield the right-of-way to a pedestrian (4 points) and reckless driving (4). I find it a bit ironic that failing to yield for a fire truck will earn only three points, but failing to yield to a person in a crosswalk will get four added to your record. Carrying an illegally concealed weapon in your car, however, will garner you zero points. You’ve got to love those priorities.

How Do Points Affect Your Insurance Rate?

Whether you are concerned about points on your license issued by your state DMV or merit rating points issued by your insurance company, it is safe to say that the more points you have accumulated on your driving record and in the insurance company’s database, the higher your insurance premium could be.

Since each insurance company uses a complex rating algorithm that is proprietary, it is virtually impossible to compare how exactly points affect your insurance premium. Financial services giant and insurance company, USAA, which caters to clientele that are mostly members of the military, veterans and their families, says that their Merit Rating Plan “points” are assigned for the severity of the driving offense that occurred and there are also surcharge points assessed for at-fault accidents.

You Can Check Your Own Points On Your License

Besides the Merit Plan point system, insurance companies use the driving record points as well in their algorithms to determine which insurance policies to issue and which ones to continue to renew. In North Carolina and many other states, you can check the status of your driver’s license, your driving record report and any points issued to you against your license at any time. The driving record will spell out if your driver’s license is currently valid, has been revoked or is suspended according to the DMV.

The topic of points on your driver’s license becomes a bit confusing when you try to decipher between a state’s driving record point system and an insurance company’s point system. To make matters even more difficult, every insurance company has its own proprietary method of evaluating car insurance applicants and assigning premiums to their risk profiles. These methods are closely guarded secrets. The only safe conclusion is that automobile accidents, tickets and violations will in fact earn you points, whether they are DMV points or insurance company Merit Plan points, and will cost you more money through higher auto insurance premiums in the future.


Hank Coleman is the founder of Own The Dollar and several other financial websites. He is a freelance writer, entrepreneur and professional in the government sector. Hank holds a Bachelor’s Degree in Business Administration, a Master’s in Finance and is currently studying for his Certified Financial Planning (CFP) credentials. Be sure to follow him on Twitter.